The reasons are diverse: fewer traditional pensions; increases in the cost of medical care; availability of easy credit before the Great Recession; and efforts to help younger family members all play into the mix.

Seniors are frequently reluctant to share their financial difficulties with family members. Too often they succumb to pressures of bill collectors, paying unsecured credit card debt before food and pharmacy.

There are stories around that collectors tell their prey that “bankruptcy is no longer available for your kind of debt” or more frightening still, “we’ve investigated you and you don’t qualify for bankruptcy”.

Frightened seniors pay more of limited incomes to high pressure collectors.

Elders and bankruptcy “reform”

Retirees, and those saving for retirement, are perhaps the only group to have benefited from some provisions of the “05 bankruptcy amendments. Social Security income is excluded from the means test, and on going repayment of 401(k) loans is protected .

So, it is easier for elders to qualify for bankruptcy relief.

Recent cases have held that a senior can file Chapter 13 and confirm a reorganization plan that leaves their Social Security income out of the calculation.

Even before bankruptcy law changed in 2005, everywhere in the country, Social Security benefits are exempt from the claims of creditors under non bankruptcy law. In California, retirement income is exempt from creditors. Keep it separate and keep it.

Why bankruptcy for seniors

Seniors tend to see paying their debts as a moral issue. They are prone to paying credit cards at the expense of food, medicine and heat.

Seniors often want to leave something to their family at their passing. It’s worth noting that the exemptions that allow a bankruptcy debtor to keep assets despite filing bankruptcy are often not available to protect a legacy from creditor claims.

Get rid of debts during your lifetime, and you have a more peaceful retirement and have something material to pass on to the next generation.

Even if creditors with a judgement can’t reach a senior’s assets, seniors may want to consider filing bankruptcy nonetheless as a mental health matter. Bankruptcy stops the stress that comes with being hopelessly in debt.

It’s no wonder that some geriatric doctors are prescribing bankruptcy.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.